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A homeowners policy is the wrong place to look for coverage when a serious trailer accident occurs.

Risk Management

Three good reasons for a personal umbrella

Looking for coverage in all the wrong places

By Donald S. Malecki, CPCU

Driving behind a vehicle towing a utility trailer full of junk, furniture, or even a boat is not enjoyable, particularly when one considers what might happen if the trailer detaches from the vehicle.

One also has to wonder whether the driver has given any thought to his or liability if the trailer were to accidentally detach while being towed.

Such accidents are fairly common, and a trailer that becomes detached while being towed at high speed can become airborne and collide with vehicles being driven by innocent motorists.

Many people who occasionally tow a trailer may never consider this possibility, and in any case they may believe their insurance is adequate in the event of an accident.

Looking to homeowners coverage

A homeowners policy is the wrong place to look for coverage when a serious trailer accident occurs. Most policies exclude liability for injury or damage caused by a trailer or semi-trailer being carried on, towed by, or hitched for towing by a motor vehicle, unless it is parked at an insured location in dead storage.

Nonetheless, many drivers who are confronted with huge money damages for a trailer accident do look to their homeowners policy for coverage. Given the trailer exclusion, anyone who seeks coverage must present a very innovative argument.

One recent case involving a homeowners policy is Pioneer State Mutual Insurance Company v. Dells, et al., 2013 WL 3020264 (Ct. App. Mich.) In October 2009, the insured, Thomas Dells, was driving his van eastbound, towing a utility trailer filled with scrap metal, on a two-lane stretch of road with a 45 mph speed limit. At the same time, motorist Toni L. Hall was traveling westbound on the same stretch.

The trailer was attached to the van with a "Reese" hitch that had been inserted into the receiver six months earlier. As Dells and Hall came close to crossing paths, Dells later stated in an affidavit that the "Reese trailer hitch separated from its receiver, causing the trailer, with the Reese hitch still attached to the trailer tongue, to separate from the van."

The trailer flew or bounced over another motor vehicle that had been proceeding behind the van, crossed over the center line into the westbound lane, and then, hitch first and while airborne, punctured the driver's side windshield of Hall's vehicle, impaling and killing her. An occupant suffered non-fatal injuries.

At the time of the accident, Dells had auto insurance with limits of $100,000 and a homeowners policy with limits of $500,000. Ultimately there was a settlement of $600,000, with the first $100,000 satisfied by Dells' auto insurance. The estate of Toni Hall then sought $500,000 from Dells' homeowners policy.

Not surprisingly, the homeowners policy contained a liability exclusion for bodily injury arising out of the use of a motor vehicle, as well as a trailer. An exception to the exclusion, however, applied to a "trailer not towed." Based on this exception, Dells argued that Hall's death arose out of the use of a trailer that was no longer being towed at the point of impact.

The court did not buy this argument. It stated: "[c]onsidering that the use of a motor vehicle. . . played an integral and indispensable role in giving rise to Hall's death, without which 'use' the trailer would not have slammed into Hall's vehicle in the first place, we conclude that the motor vehicle exclusion bars liability coverage, regardless of the fact that it was the trailer and not the van that made direct impact with Hall's car."

The court of appeals, in affirming the trial court's decision, stated that even if it were to assume that the "trailer not towed" exception needed to be examined, the death arose out of a towed trailer, given that the accident would not have occurred but for the towing of the trailer moments before impact.

Borrowed trailer

Another relevant case is Nationwide Mutual Insurance Company v. Integon Indemnity Corp., et al., 473 S.E.2d 23, Ct. App. N.C. 1996). This action arose out of a collision that occurred when a borrowed metal livestock trailer towed by a truck became detached, crossed the center line of the road, and struck a vehicle whose driver died as a result of the collision. The administrator of the decedent's estate filed a wrongful death suit against the owners of both the truck and the trailer.

The husband and wife who owned the truck and borrowed the trailer carried both an auto liability policy and a homeowners policy, and the owner of the trailer carried an auto liability policy.

The administrator of the estate maintained that both the truck owners' auto liability policy and homeowners policy applied. However, the homeowners policy specifically excluded liability for bodily injury or property damage arising out of "the ownership, maintenance, use, loading or unloading of motor vehicles or all other motorized conveyances, including trailers owned or operated by or rented or loaned to an insured."

The exclusion, however, did not apply to "(1) a trailer not towed by or carried on a motorized land conveyance; … (4) a vehicle or conveyance not subject to motor vehicle registration which is (a) used to service an insured's residence."

The trial court held that the homeowners policy did provide coverage, and it granted summary judgment in favor of the decedent's estate. On appeal, the decision was reversed. The appeals court stated that the exclusion did apply; that is, the accident, and therefore damage to the estate, arose out of, and could not have occurred without, the "use" of the truck.

Another case of note involving an attempt to collect damages under a homeowners policy for a trailer accident is White v. American Deposit Insurance Company, et al., 732 So.2d 675 (Ct. App. La. 1999). Rose White's vehicle was struck by a boat and trailer that became detached from a towing vehicle. She sued the owner of the boat and trailer, who had a homeowners policy with State Farm Fire & Casualty Company. The trial court held that the policy excluded coverage.

On appeal, the plaintiff argued that coverage applied under the policy based on language stating that "[a] boat ... not being towed by … a vehicle … is not a motor vehicle."

As in the Pioneer State Mutual case above, the plaintiff contended that the boat and trailer were not being towed at the time of her injury. Therefore, the exclusion for motor vehicles did not apply because at the exact time of the impact, the boat and trailer had separated from the vehicle.

In affirming the trial court's decision against coverage, the court of appeals held that even if the boat were not in tow at the point of impact, the damages sustained by the injured motorist arose out of the use of a motor vehicle and were directly related to the towing of the boat and trailer.

Summing up

As these cases show, it is extremely difficult to obtain coverage for trailer-related accidents under a homeowners policy.

If the defendants in each of these cases did not lose all or most of their assets as a result of these accidents, it is a safe bet they now maintain better coverage than they did. Let's face it: $100,000 or even $500,000 limits are not much when one considers what the damages can be in a death case. Even when an innocent party survives a trailer accident, he or she may sustain serious and costly injuries.

Given that homeowners insurance is unlikely to afford coverage for a trailer accident, it makes sense to recommend that insureds purchase a personal umbrella policy that will provide protection over the underlying limits. None of the defendants in the cases cited above had a personal umbrella, which would have obviated the need to seek coverage under a homeowners policy.

Personal umbrella policies can be costly, depending on the underlying insurance, the insured's loss history and other factors. But the price is cheap compared to the huge damage awards that are often granted in cases like those we have examined.

The author

Donald S. Malecki, CPCU, has spent more than 50 years in the insurance and risk management consulting business. During his career he was a supervising casualty underwriter for a large Eastern insurer, as well as a broker. He currently is a principal of Malecki Deimling Nielander & Associates LLC, an insurance, risk, and management consulting business headquartered in Erlanger, Kentucky.

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